Economic Development of India and China - Literature review Example

Economic development of India and China Number Department Introduction The economic growth of China and India has triggered much interest in the world. Economists have had extensive arguments and counterarguments on how the Asian economic giants managed to grow and cut a niche for themselves in the global economy. In the case of China, there is consensus that, in the past three decades, the country’s leadership adopted policies aimed at accumulation of wealth for rapid industrialisation and export of industrial goods (Zhijun and Jing, 2011). Prior to 1979, the country’s national planning was a catastrophe. This led to poor showing on economic scales. In India’s case, poor economic performance in the 1960s throughout 1970s has been associated with several issues including poor policies, and license-permits (Kshetri, 2011). Yet India’s poor infrastructure and lack of demand also contributed to the country’s industrial growth. The two countries adopted policies aimed at addressing their challenges, which have effectively turned around their economies since 1980s. Overview of both economies On the key economic developments in recent times, China and India occupy the first and second positions in Asia respectively (Dong et al, 2013). The two nations are by their big population size, global economic powerhouses. Whereas they develop the industries, it is clear that their growth will have deep impacts, not just within the countries but for the better part of the global economy. Such impacts which are already on record include; new market opportunities, stemming from improved purchasing power and higher competitiveness of the two greatest economies in Asia known for particular industrial commodities (Zhou et al, 2010; Prime et al, 2012). China and India have had very rapid economic development which has led to significant achievements, especially on poverty reduction. The two countries also experience problems arising from rapid economic development such as the increasing gap between rural and urban income earners and pollution of the environment (Das, 2012). Afan (2013) indicated that increasing incomes trigger structural transformation in the agricultural sector and food industry as the economy encounters changes in demand and consumer preferences. Concomitantly the effects will impact on trade, business and investment. Both global economic giants have undergone positive growth in the agricultural sector, followed by fast-developing industrial sectors and a huge slump in relative poverty. Das (2012) pointed to the difference in the preconditions and the triggering economic factors behind growth in the two countries. Massive agricultural production Both China and India have massively invested in agriculture (Dorn, 2013). The Chinese economy manifests the significant impact of agriculture on the country’s economic mix, especially in the 1980s and 1990s, when major economic reform took effect in the country (Liu, Liu, and Wei, 2005). In India, the lesser industrialized power of the two, agricultural production continues to occupy a very important part of the economy. While agricultures portion in the Gross Domestic Product (GDP) has been on a downward trend, the industry still provides massive employment opportunities for the locals (Agrawal, and Khan, 2011; Bensidoun, Lemoine, and Ünal, 2009). Economic contribution in this sector is undeniably of tremendous significance for prospective policies and measures aimed at the realization of the Millennium Development Goals (MDGs). This is especially true for the need to alleviate abject poverty and food insecurity in the economy by 2015 (Winters, and Yusuf, 2007; Gupta, and Wang, 2009). Appropriate economic responses China’s and India’s economic growth can be attributed to the tactful manner in which they have responded to new global adjustments such as free trade, globalization, agricultural production, rural growth and poverty alleviation (Das, 2012). The two countries have managed to stave off unfavourable and or unreliable economic conditions in their own unique ways. Moreover, both economies are coming up as key players in the fields of technology engineering and agricultural research in Asia (Gupta, and Wang, 2009). The two fields are of great significance not only locally by in the weaker economies in the region. Most of such smaller economies are increasingly sidling toward the two Asian powers, especially in the wake of comparative decline in the provision of relevant resources by international research bodies (Iqbal, Masood, and Ramzan, 2013). This has projected the two countries as dependable allies and trading partners in not only the region but the world. Built-up capability The rapid evolution of China’s and India’s export muscle has led to tremendous growth within the last three decades. It is notable that the economic strengths accumulated by both countries prior to the initiation of sweeping reforms contributed to their rapid development later on (Gordon, 2012). Although, planning by the two countries somewhat resulted in slip-ups, inefficiencies, and improper disbursement of resources in both economies, their export baskets are more complicated as far as per capita income is concerned. The economies are also diversified with regard to the nature of commodity exports. In light of the diverse economic baskets, China and India are better than countries experiencing similar economic development (Gupta, and Wang, 2009). Bose (2012), therefore, argued that the firm economic structure could have been developed through proper planning, favourable industrial policy, and sector targeting. According to Siddiqui (2009) the primary aim of the economic development policies of both states immediately after the World War II was to turnaround each of the economies into an industrialised giant. Both countries mainly preferred capital-intensive strategies as part of an elaborate move aimed at substituting the massive imports with local supplies (Li, and Wei, 2011). The countries intended to cultivate a culture of lesser-dependence on foreign countries. Interestingly, both economies invested heavily in industrial development during the 1950s’ and 1960s’planning era that enabled them to amass massive resources for deployment to the largely unexplored industrial sectors. Poverty reduction Owing to the significance of poverty reduction to national economic growth, China’s statistics on poverty level have been impressive. Li and Wei (2011) indicated that China’s poverty level has reduced ten times as a percentage of the entire rural population. By the early 2000s, which basically marked the first two decades of economic reform in the country, poverty reduced to about 3 percent of the entire rural population. When the poverty line is analyzed on dollar-a-day index, China witnessed a decline in the prevalence of poverty by half to 16 percent between 1990 and 2002, at the same time when the county’s economic growth was exponentially growing. In general, economic growth based on higher GDP has been one of the main policy areas of ensuring that the country realizes uniform growth (Chai, and Roy, 2006; Eichengreen, Gupta, and Kumar, 2010). Despite the quest for the realization of uniform growth, the impacts of economic development on poverty alleviation have grown weaker in China within the last three decades. Additionally, the growth of the agricultural sector is a proven strategy for poverty alleviation (Suresh, 2012). The widening income divide between urban and rural areas hinders poverty reduction, thus calls for a broader strategy for sustainable growth in the future. Unfortunately, China has not done enough to rein in the income disparities (Kshetri, and Dholakia, 2011). In India, the late 1960s witnessed tremendous successes in poverty reduction efforts (Bensidoun, Lemoine, and Ünal, 2009). The subsequent two decades saw a decline in the poverty ratio by 12 percentage points from 51 percent according to national statistics (Mushkat, and Mushkat, 2012). The change was due to great achievements made in the agricultural sector and productivity (Kshetri, 2011; Das, 2007). Despite the tremendous steps towards economic growth, India is facing the problem of uneven ownership of land (Kshetri, 2011). Few people control large parcels of land, while large populations remain landless (Das, 2007). As a consequence, further efforts to alleviate poverty in the rural areas are highly impacted by the persistent transfer of labour to other sectors of the economy. India has been affected by deep regional variations within its jurisdiction. The decline in the percentage of the people below the dollar-a-day poverty index by 8 percentage points from 1990 to 2002 can be attributed to the tremendous growth of the manufacturing and service industries. Yet the high population growth has complicated reduction efforts. Food security Food security also contributes to higher economic growth and productivity (Das, 2012). The change in per capita food availability refers to food security. Since1980s, China’s per capita food availability grew from 1 717 kcal to 2 328 kcal (Afan, 2013). The past decade has witnessed higher levels of food security of up to 3 000 kcal per day, a level that neared the threshold of developed countries. Within the past three decades, China has managed to expand the agricultural sector from the hitherto subsistence crop production, and opened markets for large scale farm produce. Although market risks still exist, almost half of the agricultural land is under irrigation (Pai et al, 2012). This has tremendously lowered production risks, as farmers do not need to depend on rainfall for crop production. The country has also diversified farm household incomes, and boosted food security through policies which require at least one member of a family to seek for employment in other sectors. India’s era of Green Revolution boosted the country’s food security. Per capita food availability and income improved substantially. Indian agricultural sector was highly cushioned from risks arising from the consequences of bad weather (Mitra, 2013). The country greatly commercialized and diversified crop production from cereals to higher value produce for both subsistence and large scale farmers (Das, 2007). Great growth in livestock keeping and fishing industry were aimed at cushioning the country from likely crop failures. The country also achieved a change in consumption patterns, with higher demand for non-cereal food increasing. Despite the economic progress, which catapulted the economy to one of the biggest in Asia, the problem of food security still persists, especially in rural areas and other remote regions (Kshetri, 2011). The future of China and India Dholakia (2012) noted that trade liberalization and globalization are creating an enabling environment for genuine economic growth in the world. If China reins effectively in her unfair trading practices such as undervaluing it currency, the economy will be set for more expansion in the region. India’s economy is currently two-and-a-half times smaller than China’s, and it is not expected to surpass China anytime soon, because China is more industrialised and has outpaced India is the reception of Foreign Direct Investment (FDI) and multinational investments. Within the next seven years, China is expected to be the second largest trading partner in the world (Massetti, 2011). Conclusion China’s and India’s economies are apparently the top-best in Asia. The past three decades have witnessed tremendous economic growth in both countries due to sweeping policies to that effect. Both China and India have implemented agricultural policies aimed at spurring industrial growth and boosting per capita food security within their respective jurisdictions. 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